Legislators ponder tax credit for student loan payments

Giving Iowans a state tax credit for their student loan debt if they earned a degree from a non-profit university, college or community college in Iowa has been discussed at the statehouse, but the scope of the tax break might make it too pricey for legislators to even consider. Representative Greg Forristall, a Republican from Macedonia, isn’t ready to sign off on the concept yet.

“When we get that fiscal note and we decide who qualifies for this, we may need to trim this back a little bit in terms of the portion that qualifies for the tax credit,” Forristall said during a House subcommittee meeting on the concept.

And legislators are under pressure to expand the pool of people who could take the credit, if it is created. For-profit universities argue their students should get the tax break, too.

“We have a concern with the definition of eligible institution,” Mike Heller, a lobbyist for Kaplan University, said. “We think it should be expanded to include students who graduate from for-profit institutions. The debt loan concerns are the same for the student.”

Paula Dierenfeld, a lobbyist for the University of Phoenix, said the bill as currently written would deny the credit to Iowans who earn a degree on-line from the University of Phoenix — or the University of Wisconsin.

“It’s kind of a new era of learning in Iowa with these on-line courses…and we believe that those students because they’re residents in Iowa, taxpayers in Iowa, receiving their degrees here in Iowa and working in Iowa should be as eligible for these tax credits as other students,” Dierenfeld said.

Trade schools are clamoring to get their students signed up for the potential tax credit, too.

“We have numerous cosmetology schools in the state and we would like our students to benefit from this as well,” said Kent Hartwig, a lobbyist for the Iowa Cosmetology School Association.

An official from the Iowa Department of Revenue also points out there would be “double-dipping” if Iowans could get a tax credit that’s worth to up to half of the student loan payments they make in a year. That’s because there’s already a tax break on the interest paid on student loans. Income taxpayers can claim up to $2500 in student loan interest on both their state and federal tax returns today.